Time for premiers to step into void

Provinces must lead on economic as well as social policy

It’s time for the premiers to step into the leadership void

Adam Scotti/Reuters

Federal-provincial relations in Canada often bring to mind schoolyard analogies. But which ones are most appropriate? Are the provincial premiers a bunch of unruly youngsters in need of stern discipline? Or are they more like high school grads, grown up and canny enough to show their old teacher a thing or two? Lately both seem appropriate.

Recent weeks offer plenty of evidence of both the truculence and the maturity of the premiers. At their annual meeting in Halifax at the end of July, the provincial leaders made useful progress in sharing best practices for treating heart disease and diabetes as well as establishing a national bidding process to bring down the cost of generic drugs. All this without assistance from Ottawa.

The evidence on co-operative federalism is even more convincing when it comes to education. Canada has consistently delivered top-ranked performance on international tests in math, science and reading. This seems powerful evidence that a dominant role for the federal government is not a requirement for high quality, innovative learning. A U.S. academic study recently calculated that if the American education system (which is far more centralized than Canada’s) produced students with math skills on par with Canadian students, the result would be a 20 per cent boost in income over the career of every U.S. worker.

Provincial independence has been encouraged by the Prime Minister, who has avoided interfering in matters of exclusive provincial jurisdiction. While Stephen Harper took flak from the premiers for refusing to meet with them after Halifax, his standoffishness is entirely consistent, and to their benefit. Under the Conservatives, federal transfers have typically come without strings, a distinct difference from Liberal regimes when Ottawa repeatedly inserted itself into provincial matters—to the great exasperation (at the time) of the premiers.

And yet while the provinces have shown themselves entirely capable of managing social policy in a manner consistent with the national interest, their performance on matters of economic significance has been much different.

Case in point, the Northern Gateway pipeline dispute between British Columbia and Alberta. Intended to carry heavy oil from Alberta to a Pacific port in B.C. for shipment to Asia, Northern Gateway has been derailed by B.C. Premier Christy Clark’s demands that her province receive a greater share of the economic benefits. While B.C. is within its rights to scrutinize the environmental impacts of the project, the use of geographic leverage to demand a bigger cut of its income is a very dangerous precedent. Individual provinces cannot be allowed to hold projects of national importance for ransom whenever a border is crossed. All premiers need to come to an agreement on this matter post-haste.

Another concern is attempts by provinces to protect favoured businesses from foreign takeover. Quebec is the latest province to tenuously declare a firm “strategic,” following a bid by American hardware chain Lowe’s for Quebec-based Rona. This is properly a matter for Rona’s shareholders to decide and any political interference undermines the openness of Canada’s economy and our access to foreign capital.

But the biggest potential irritant to federal-provincial relations is the fate of federal transfer payments themselves. In a paper this month, former Bank of Canada governor David Dodge and two co-authors sound the alarm over a looming collision in equalization, a complicated federal program that sees Ottawa take $15 billion from taxpayers in “have” provinces and distribute it to the governments of “have-not” provinces so as to equalize revenue bases across the country.

Dodge warns the recent demotion of Ontario to have-not status threatens the sustainability of equalization since it means more than two-thirds of the country’s population now live in a province receiving equalization. “The maths no longer work,” he writes. It will become impossible to remove enough cash from richer provinces to hand out to the poorer ones based on the current formula. With several provinces highly dependent on equalization (Quebec and New Brunswick in particular), its demise will have far-reaching implications for the nature of Confederation. Change is desperately required.

Remaking equalization will inevitably produce winners and losers. Finding the best solution to this knotty problem will require premiers to put aside parochial squabbles and focus on what’s best for Canada as a whole. The same goes for pipelines, foreign takeovers and a host of national issues that happen to touch provincial boundaries. Ottawa certainly has a crucial role to play in the national economy, and we expect the Prime Minister to make his presence felt in these matters. But it’s also time for the premiers to show they can be leaders on economic as well as social policy.

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